Realism or Absurdity? Fiat Money and TBTF (Too Big To Fail) in 2015

By Geoffrey Cope….

The fear of GERMANY. Is it real? – read more:

billionmarksSPRING 2015 – Following the November 16th, 2014 G20 nation meeting in Brisbane, the confiscation of depositor funds was not a one-off emergency measure limited to Cyprus. Similar “bail-in” policies or models are now appearing in multiple countries.

New Rules: Cyprus-style Bail-ins to Take Deposits and Pensions

The future is for ordinary depositors of a Bank to become unsecured creditors (the largest group for a deposit-taking institution) under the new laws enacted in the G20 nations. The resolution process (that is, the bankruptcy procedure) would see deposits confiscated and turned into equity or liquidated to pay off secured debtors.

Then we should consider:

  • Central governments printing money
  • Governments tell us the 2008 Crisis is over. We should be confident as markets grow
  • Government has not found a way to reduce public debt
  • The bigger scenario in the World currency game has unfolded

inflation graphAll that we will see is the illusion Governments create for us, “the first LAW is that we must not allow a breakdown in the confidence in ‘Paper Money’ – something known as “FIAT MONEY”. (FIAT money means printed money that is not linked to any asset, in fact just a piece of paper)

  • Did you EVER QUESTION one simple fact that the money you deposit with your bank is in fact not UNDER your CONTROL, you are in fact are just a creditor of the bank & should anything happen to the bank you will lose your money or at best go on the list of creditors. (Except the small amount the bank guarantees to repay you +/- 100’000 GBP or $ or other currency).

One solution is to protect depositor funds with separate “depository banking” away from investment banking for both public and private revenues by establishing a grid of publicly-owned banks, on the model of the Bank of North Dakota.

Another immediate SOLUTION today is to request the Bank to open a CUSTODIAN ACCOUNT and the investments in the name of the account will be safe. (These funds are not recorded in the balance sheet of the Bank).

How about your PENSION – you are smart enough to understand that with such low interest yields at present which are forecast to remain low for several more years, and the costs incurred by the Insurance companies, that they now cannot create a high enough yield to pay for the projected pensions. (We cannot rely on the statement from the sales-person, “they performed over the last 20 years”). Nor can we expect an adequate annuity rate. Governments are not collecting enough revenue to support State Pensions.

Solution-What should we do? Yes there are a number of ways to prepare for the future – most not so palatable based on our present education of what to do, but are worth considering.

My personal interest is the hobby dealing with the creation of “Money” from a Numismatic viewpoint, I have watched how the world and its money has been adjusted over the centuries, NOT just in modern times. It starts with what is demanded by people and fails miserably as greed overwhelms responsibility. This can be seen from Roman times when even Brass coins were reduced in weight as the value of metal increased, until the USA finally left the GOLD standard in 1971.

The $ is no longer linked to any specific asset. This is the beginning of the end as the currency is reduced to pieces of ‘wallpaper’. The EURO, GBP, RMB? Are they all too great to fail? The breakdown in confidence is being put in place and we will see a new world order.

A Way Forward with a Careful Balance

Fine Art from Numismatics to the Mona Lisa or a roof over your head. Hold 15% of physical bullion gold as an insurance policy. Tax will be levied on savings income, but not on your own roof and vegetable patch, woodland or Fine Art collection. For me, I see the ‘art in the form of a coin’ with a 60% charge only on disposal or maybe a future 85% tax where bank transfer + documentation on acquisition cannot be shown.

Maybe retirement can never be afforded as was planned and given to previous generations. Consider ‘un-earned income charged’ at 75% on capital wealth, asset values depreciating at 2 % per annum as the ‘printing of money’ continues. A 1% capital gains tax per annum on total wealth. Inheritance tax of up to 80%. Reduction of wealth by taxation & wealth transfer within a generation. The ending of existing and new trusts for taxation avoidance/evasion. A real tax on savings as these will not be allowed even though tax has been paid. Governments will raise the money required to fulfill their ambitions from wherever the wealth resides.

There is a new geo-political position, a reverse in what your expectation was to be. The West has enjoyed the plundering of the East and now the East has become the workshop of the world and wants its share of the world wealth it has and still is creating. Few understand the magnitude of China alone, the natural resources, the power of harnessing 1.5b people. GOLD is being transferred east. (In thousands of years those that hold Gold and rare metals own the world).

Final Conclusion

If you have deposits, new rules provide a massive incentive to transfer them into a more protected form of assets. When interest rates are very low, holding some cash in safe boxes becomes attractive.

Money used as wallpaper.
Money used as wallpaper.

A few questions to be asked – or maybe the answer is in the question, between 2008 when there were just over $600 billion USA debt and in 2015 now say $5 trillion? It could soon grow to $20 trillion. Job done. America’s debt is wiped out as the $ has little value. Who cares “USA Ltd” is still the most powerful country in the World. Where has the money gone?

© 2015 Geoffrey Cope

[email protected]

Related Articles


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.